Asian shares fell on Thursday and the euro struggled close to a seven-week low to the dollar after a botched German bond sale raised alarm that Europe's ever-worsening sovereign debt crisis is starting to affect even the continent's economic powerhouse.
Oil slipped further, a day after weak data from Europe, China and the United States stoked fears that the global economy may be heading for a recession that would dull demand for industrial commodities.
Germany's bond sale on Wednesday was the least successful since the launch of the euro, raising concern about the price Berlin may pay for its role as paymaster to a region racked by a crisis that has toppled governments in Greece and Italy.
We have been saying for a while that Germany was effectively the only sovereign in the euro zone, all the others were credits, said Russell Jones, head of global rates strategy at Westpac Bank in Australia, in a note.
This may no longer be the case. And that is extremely worrying. We are journeying more and more into uncharted waters here.
Tokyo's Nikkei share average fell 1.5 percent, partly catching up with losses elsewhere on Wednesday, when Japanese markets were closed for a holiday.
MSCI's broadest index of Asia Pacific shares outside Japan dipped 0.1 percent.
Wall Street shares fell more than 2 percent on Wednesday, and world stocks fell to a six-week low, on data showing slowing factory output in manufacturing titans China and Germany and weak consumer spending in top consumer the United States.
Germany's bond sale added to the gloom, knocking the euro down 1 percent. Depressed yields in Europe's last safe haven played a part, but analysts warned it also signalled a broader shunning of the region's financial system.
The other part is that market makers don't want to have a position because of the very distressed nature of financial markets as a whole, said Marc Ostwald, strategist at Monument Securities. There's certainly a partial element of 'they would rather not have euros' in there.
The single currency languished around $1.3355 on Thursday, having fallen as low as $1.3318 in the previous session.
Commodity currencies, unsettled by the weak factory data from major importer China, extended their decline. The Australian dollar slid below $0.97 for the first time since early October. It last stood at $0.9697, having plumbed a trough at $0.9664 overnight.
U.S. crude oil slipped 0.3 percent, falling below $96 a barrel, following on from a 2 percent slide on Wednesday.
(Editing by Robert Birsel)